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With Oil Prices Down 20%, OPEC Pushes for Stability With Oil Prices Down 20%, OPEC Pushes for Stability
(8 days later)
A 20 percent plunge in oil prices this year since the coronavirus outbreak took hold has alarmed the world’s top oil officials, and their challenge to prop up prices keeps getting harder.A 20 percent plunge in oil prices this year since the coronavirus outbreak took hold has alarmed the world’s top oil officials, and their challenge to prop up prices keeps getting harder.
Leaders from the OPEC nations and Russia are gathered in Vienna this week to halt the slide, with high stakes and few good options. Russia, so far, is resisting production cuts aimed at stabilizing prices.Leaders from the OPEC nations and Russia are gathered in Vienna this week to halt the slide, with high stakes and few good options. Russia, so far, is resisting production cuts aimed at stabilizing prices.
IHS Markit, a research firm, estimated that demand for oil would fall by 3.8 million barrels a day, or about 4 percent of world supplies, over the first three months of this year — the largest quarterly drop in demand the researchers had ever seen, exceeding declines during the 2008 financial crisis.IHS Markit, a research firm, estimated that demand for oil would fall by 3.8 million barrels a day, or about 4 percent of world supplies, over the first three months of this year — the largest quarterly drop in demand the researchers had ever seen, exceeding declines during the 2008 financial crisis.
While economic activity has begun to recover in China, travel for tourism and business has slowed sharply and supply chains and manufacturing are under tremendous pressure.While economic activity has begun to recover in China, travel for tourism and business has slowed sharply and supply chains and manufacturing are under tremendous pressure.
Evaporating global demand makes the job even harder for the Organization of the Petroleum Exporting Countries, whose headquarters are in Vienna.Evaporating global demand makes the job even harder for the Organization of the Petroleum Exporting Countries, whose headquarters are in Vienna.
“This is a major meeting similar to the financial crisis,” said Gary Ross, president of Black Gold Investors, a trading firm.“This is a major meeting similar to the financial crisis,” said Gary Ross, president of Black Gold Investors, a trading firm.
Facing this grim outlook, the delegates would seem to have little choice but to pile further cuts on top of the already previously agreed curbs of 2.1 million barrels a day, or about 2 percent of global oil supplies.Facing this grim outlook, the delegates would seem to have little choice but to pile further cuts on top of the already previously agreed curbs of 2.1 million barrels a day, or about 2 percent of global oil supplies.
The petroleum revenues that governments like Saudi Arabia and Algeria depend on are shrinking fast. Reducing supply is the producers’ only route to bolstering prices and income. Cuts, though, will most likely mean a continued erosion of OPEC’s share of the world market — at 35 percent, its lowest level in decades — as producers outside the cartel, especially shale drillers in the United States, continue to increase their output.The petroleum revenues that governments like Saudi Arabia and Algeria depend on are shrinking fast. Reducing supply is the producers’ only route to bolstering prices and income. Cuts, though, will most likely mean a continued erosion of OPEC’s share of the world market — at 35 percent, its lowest level in decades — as producers outside the cartel, especially shale drillers in the United States, continue to increase their output.
On Wednesday, Russia, which has cooperated with OPEC for the last three years, balked at making more cuts at a preliminary meeting, Reuters reported, sending prices for Brent crude down by more than 1 percent to $51.26 a barrel.On Wednesday, Russia, which has cooperated with OPEC for the last three years, balked at making more cuts at a preliminary meeting, Reuters reported, sending prices for Brent crude down by more than 1 percent to $51.26 a barrel.
Even without a formal cut by OPEC and Russia, exports have already plummeted from Venezuela, Libya and Iran without supporting oil prices. An escalating civil war in Libya in recent weeks has cut up to a million barrels of oil a day from the market.Even without a formal cut by OPEC and Russia, exports have already plummeted from Venezuela, Libya and Iran without supporting oil prices. An escalating civil war in Libya in recent weeks has cut up to a million barrels of oil a day from the market.
Venezuelan daily production declined by more than 600,000 barrels in 2019, and tightening American sanctions are expected to reduce production by a further 25 percent, or 200,000 barrels, by the end of this year. Iranian oil exports, once a mainstay of oil markets in Asia, were reduced to a trickle of 300,000 barrels a day even before the spread of the coronavirus.Venezuelan daily production declined by more than 600,000 barrels in 2019, and tightening American sanctions are expected to reduce production by a further 25 percent, or 200,000 barrels, by the end of this year. Iranian oil exports, once a mainstay of oil markets in Asia, were reduced to a trickle of 300,000 barrels a day even before the spread of the coronavirus.
With those three OPEC countries already suffering an oil production downturn, it would take an additional cut of one million barrels a day to make any meaningful difference to the market, according to a report by S&P Global Platts Analytics on Wednesday.With those three OPEC countries already suffering an oil production downturn, it would take an additional cut of one million barrels a day to make any meaningful difference to the market, according to a report by S&P Global Platts Analytics on Wednesday.
Recent and future production cuts from OPEC members are being replaced by increased output from other countries, particularly the United States, Norway and Brazil. Any support for prices that OPEC can manage will help struggling American oil companies to keep up production, and further expand exports.Recent and future production cuts from OPEC members are being replaced by increased output from other countries, particularly the United States, Norway and Brazil. Any support for prices that OPEC can manage will help struggling American oil companies to keep up production, and further expand exports.
When the financial crisis slammed demand in 2008, OPEC announced cuts of 4.2 million barrels a day, or about 6 percent of supply at that time. Mr. Ross said he expected a substantial cut this time around.When the financial crisis slammed demand in 2008, OPEC announced cuts of 4.2 million barrels a day, or about 6 percent of supply at that time. Mr. Ross said he expected a substantial cut this time around.
“They have to shock the market to support prices; they will do it,” he said.“They have to shock the market to support prices; they will do it,” he said.
The probability that the group would agree to cuts appeared to increase Tuesday after a technical committee recommended daily trims of 600,000 to one million barrels. Reflecting traders’ optimism about reduced supply, prices for Brent crude, the international standard, rose on Wednesday morning, before backsliding later in the day.The probability that the group would agree to cuts appeared to increase Tuesday after a technical committee recommended daily trims of 600,000 to one million barrels. Reflecting traders’ optimism about reduced supply, prices for Brent crude, the international standard, rose on Wednesday morning, before backsliding later in the day.
But Russia continues to hold out. In the past, Russian officials have said that more time is needed to evaluate an uncertain situation.But Russia continues to hold out. In the past, Russian officials have said that more time is needed to evaluate an uncertain situation.
Amrita Sen, chief oil analyst at Energy Aspects, a market research firm, said OPEC was preparing a cut of one million barrels or more. She said even a cut of that size was unlikely to lift prices, but it might stabilize them. OPEC’s aim at this meeting, she said, was to make sure that a huge surplus of oil does not build up at tank farms and on ships across the world that might weigh on the market for months if not years.Amrita Sen, chief oil analyst at Energy Aspects, a market research firm, said OPEC was preparing a cut of one million barrels or more. She said even a cut of that size was unlikely to lift prices, but it might stabilize them. OPEC’s aim at this meeting, she said, was to make sure that a huge surplus of oil does not build up at tank farms and on ships across the world that might weigh on the market for months if not years.
Updated July 7, 2020
The coronavirus can stay aloft for hours in tiny droplets in stagnant air, infecting people as they inhale, mounting scientific evidence suggests. This risk is highest in crowded indoor spaces with poor ventilation, and may help explain super-spreading events reported in meatpacking plants, churches and restaurants. It’s unclear how often the virus is spread via these tiny droplets, or aerosols, compared with larger droplets that are expelled when a sick person coughs or sneezes, or transmitted through contact with contaminated surfaces, said Linsey Marr, an aerosol expert at Virginia Tech. Aerosols are released even when a person without symptoms exhales, talks or sings, according to Dr. Marr and more than 200 other experts, who have outlined the evidence in an open letter to the World Health Organization.
Common symptoms include fever, a dry cough, fatigue and difficulty breathing or shortness of breath. Some of these symptoms overlap with those of the flu, making detection difficult, but runny noses and stuffy sinuses are less common. The C.D.C. has also added chills, muscle pain, sore throat, headache and a new loss of the sense of taste or smell as symptoms to look out for. Most people fall ill five to seven days after exposure, but symptoms may appear in as few as two days or as many as 14 days.
Scientists around the country have tried to identify everyday materials that do a good job of filtering microscopic particles. In recent tests, HEPA furnace filters scored high, as did vacuum cleaner bags, fabric similar to flannel pajamas and those of 600-count pillowcases. Other materials tested included layered coffee filters and scarves and bandannas. These scored lower, but still captured a small percentage of particles.
A commentary published this month on the website of the British Journal of Sports Medicine points out that covering your face during exercise “comes with issues of potential breathing restriction and discomfort” and requires “balancing benefits versus possible adverse events.” Masks do alter exercise, says Cedric X. Bryant, the president and chief science officer of the American Council on Exercise, a nonprofit organization that funds exercise research and certifies fitness professionals. “In my personal experience,” he says, “heart rates are higher at the same relative intensity when you wear a mask.” Some people also could experience lightheadedness during familiar workouts while masked, says Len Kravitz, a professor of exercise science at the University of New Mexico.
The steroid, dexamethasone, is the first treatment shown to reduce mortality in severely ill patients, according to scientists in Britain. The drug appears to reduce inflammation caused by the immune system, protecting the tissues. In the study, dexamethasone reduced deaths of patients on ventilators by one-third, and deaths of patients on oxygen by one-fifth.
The coronavirus emergency relief package gives many American workers paid leave if they need to take time off because of the virus. It gives qualified workers two weeks of paid sick leave if they are ill, quarantined or seeking diagnosis or preventive care for coronavirus, or if they are caring for sick family members. It gives 12 weeks of paid leave to people caring for children whose schools are closed or whose child care provider is unavailable because of the coronavirus. It is the first time the United States has had widespread federally mandated paid leave, and includes people who don’t typically get such benefits, like part-time and gig economy workers. But the measure excludes at least half of private-sector workers, including those at the country’s largest employers, and gives small employers significant leeway to deny leave.
So far, the evidence seems to show it does. A widely cited paper published in April suggests that people are most infectious about two days before the onset of coronavirus symptoms and estimated that 44 percent of new infections were a result of transmission from people who were not yet showing symptoms. Recently, a top expert at the World Health Organization stated that transmission of the coronavirus by people who did not have symptoms was “very rare,” but she later walked back that statement.
Touching contaminated objects and then infecting ourselves with the germs is not typically how the virus spreads. But it can happen. A number of studies of flu, rhinovirus, coronavirus and other microbes have shown that respiratory illnesses, including the new coronavirus, can spread by touching contaminated surfaces, particularly in places like day care centers, offices and hospitals. But a long chain of events has to happen for the disease to spread that way. The best way to protect yourself from coronavirus — whether it’s surface transmission or close human contact — is still social distancing, washing your hands, not touching your face and wearing masks.
A study by European scientists is the first to document a strong statistical link between genetic variations and Covid-19, the illness caused by the coronavirus. Having Type A blood was linked to a 50 percent increase in the likelihood that a patient would need to get oxygen or to go on a ventilator, according to the new study.
If air travel is unavoidable, there are some steps you can take to protect yourself. Most important: Wash your hands often, and stop touching your face. If possible, choose a window seat. A study from Emory University found that during flu season, the safest place to sit on a plane is by a window, as people sitting in window seats had less contact with potentially sick people. Disinfect hard surfaces. When you get to your seat and your hands are clean, use disinfecting wipes to clean the hard surfaces at your seat like the head and arm rest, the seatbelt buckle, the remote, screen, seat back pocket and the tray table. If the seat is hard and nonporous or leather or pleather, you can wipe that down, too. (Using wipes on upholstered seats could lead to a wet seat and spreading of germs rather than killing them.)
If you’ve been exposed to the coronavirus or think you have, and have a fever or symptoms like a cough or difficulty breathing, call a doctor. They should give you advice on whether you should be tested, how to get tested, and how to seek medical treatment without potentially infecting or exposing others.
The officials, she said, want to “ensure that inventories don’t build so far that they can’t run them down.”The officials, she said, want to “ensure that inventories don’t build so far that they can’t run them down.”
Bjornar Tonhaugen, head of oil market research at Rystad Energy, a research firm, said that a cut of a million barrels a day would roughly balance the market but only as long as Libya failed to restart production.Bjornar Tonhaugen, head of oil market research at Rystad Energy, a research firm, said that a cut of a million barrels a day would roughly balance the market but only as long as Libya failed to restart production.
“The market would not be pleased” with one million barrels a day, he said. Prices would probably “not collapse further immediately, but it won’t be enough to get prices going upward much.”“The market would not be pleased” with one million barrels a day, he said. Prices would probably “not collapse further immediately, but it won’t be enough to get prices going upward much.”
The outcome of the meeting may turn on whether tensions in the alliance between Saudi Arabia, OPEC’s de facto leader, and Russia, a major producer, can be papered over.The outcome of the meeting may turn on whether tensions in the alliance between Saudi Arabia, OPEC’s de facto leader, and Russia, a major producer, can be papered over.
With the gravity of the coronavirus outbreak becoming apparent, Saudi Arabia’s oil minister, Abdulaziz bin Salman, tried to organize an emergency meeting last month to discuss cuts, but Russian officials resisted, saying that more time was needed to assess the impact of the epidemic. As a compromise, the group held a technical committee meeting that recommended cuts of 600,000 barrels a day.With the gravity of the coronavirus outbreak becoming apparent, Saudi Arabia’s oil minister, Abdulaziz bin Salman, tried to organize an emergency meeting last month to discuss cuts, but Russian officials resisted, saying that more time was needed to assess the impact of the epidemic. As a compromise, the group held a technical committee meeting that recommended cuts of 600,000 barrels a day.
In the market, though, worries grew that the alliance between OPEC and Russia that has helped prop up prices in recent years might be falling apart.In the market, though, worries grew that the alliance between OPEC and Russia that has helped prop up prices in recent years might be falling apart.
Some analysts are betting that the risks of a further price drop if the meeting fails to reach a deal will persuade Moscow to go along.Some analysts are betting that the risks of a further price drop if the meeting fails to reach a deal will persuade Moscow to go along.
“Russia has certainly slow-walked” toward an agreement, Helima Croft, head of global commodity strategy at RBC Capital Markets, an investment bank, wrote in a note to clients, “but the economic and political benefits of cooperation remain compelling.”“Russia has certainly slow-walked” toward an agreement, Helima Croft, head of global commodity strategy at RBC Capital Markets, an investment bank, wrote in a note to clients, “but the economic and political benefits of cooperation remain compelling.”
OPEC gatherings have become more complex with the presence of Russia and other producers in recent years. Instead of a one-day meeting as in the past, this session is expected to consume three days with a ministerial committee meeting Wednesday followed by an OPEC meeting Thursday. Russia and other producers like Oman and Kazakhstan are then expected to join officials from the 14 OPEC countries on Friday.OPEC gatherings have become more complex with the presence of Russia and other producers in recent years. Instead of a one-day meeting as in the past, this session is expected to consume three days with a ministerial committee meeting Wednesday followed by an OPEC meeting Thursday. Russia and other producers like Oman and Kazakhstan are then expected to join officials from the 14 OPEC countries on Friday.